1. Analysing the reorganisation

Understanding the requirement for a valuation is essential to the framing and outcome of the valuation exercise.

The simplest of reorganisations may involve the transfer of a single asset from one group entity to another under an asset transfer agreement. This may lead to the cessation of activities relating to that asset for the transferor and the commencement of such activities for the transferee.

If the trigger is a multinational group reorganisation the valuation must reflect an understanding of:

• The group’s principal activities;
• The commercial rationale for the reorganisation;
• The identity of the entities involved, such as the parties to a business or asset transfer agreement. This may also include entities engaged in intragroup transactions with these entities;
• The commercial role of these entities within the multinational group, including their contribution to the commercial success of the group;
• The legal mechanism by which the reorganisation will be affected and the transaction perimeter; 
• How the role of involved entities will change following the group reorganisation; and
• Any tax benefits which could accrue to one or more parties to the reorganisation which could lead to potential biases in the valuation analysis.

In most jurisdictions, the transfers are treated as taking place at either ‘market value’ or on ‘arm’s length’ terms.

The valuer needs to be able to identify what is moving as part of the reorganisation and the taxing provisions that apply.